Greetings, and welcome to the FirstEnergy Corp. Second Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Irene Prezelj, Executive Director, Investor Relations of FirstEnergy Corp. Thank you, Ms. Prezelj, you may begin.

Thanks, Rob, and good afternoon. During this conference call, we will make various forward-looking statements within the meaning of the Safe Harbor provision of the United States Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements with respect to revenues, earnings, performance, strategies, prospects and other aspects of the business of FirstEnergy Corp. are based on current expectations that are subject to risks and uncertainties. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements. Please read the Safe Harbor statement contained in the consolidated report to the financial community, which was released earlier today, and is also available on our website under the earnings release link. Reconciliations to GAAP for the non-GAAP earnings measures we will be referring to today are also contained in that report, as well as on the Investor Information section on our website at www.firstenergycorp.com/ir. Participating in today's call, are Tony Alexander, President and Chief Executive Officer; Mark Clark, Executive Vice President and Chief Financial Officer; Harvey Wagner, Vice President and Controller; Jim Pearson, Vice President and Treasurer; Bill Byrd, Vice President of Corporate Risk; and Ron Seeholzer, Vice President of Investor Relations. I'll now turn the call over to Tony.

Thanks, Irene, and good afternoon, everyone. Thank you for joining us today. In the 3 months since we've met with you in New York, we've made significant progress, integrating Allegheny, and implementing the strategies we outlined. Our second quarter results are in line with our expectations, and we are on track to meet our objectives and capture the benefits we outlined for you at that meeting. At this point, I'm very pleased with our performance. And given our confidence in our business strategy and our ability to achieve our merger targets, we have narrowed our 2011 non-GAAP earnings guidance to $3.30 to $3.50 per share. Mark will talk more about the revised guidance, including expectations for the third and fourth quarters when he discuss his financial results a little later. He will also provide updates on the major areas we outlined in May, including debt reduction, asset sales and our liquidity position. For my part, I'll provide a detail around our progress with the merger savings and review some other recent developments for you. Let's start with the merger. Through the end of the second quarter, we have completed merger-related initiatives that will allow us to capture approximately $132 million in pretax benefits on an annual basis. That's over 60% of the merger-related savings we expect to achieve by year end. Keep in mind that the $132 million benefit is an annualized figure, so only a portion is reflected in the second quarter results. But this is consistent with the timing and realization we expected. The completed actions include once-and-done items like restructuring our combined credit facilities, reorganizing the executive team, and canceling many overlapping or duplicative contractual arrangements such as insurance policies, and Alleghany's outsourced information technology services contract. Most of the remaining actions are associated with enhancements and…

Thanks, Tony, and good afternoon, everyone. Today, I would like to guide you through our second quarter, and then I'll spend a few minutes updating you on our progress against many of the financial targets we outlined during our analyst meeting in May. As Tony said, our second quarter 2011 results are consistent with our expectations. Excluding special items, non-GAAP earnings were $0.65 per share compared to $0.82 in the second quarter of 2010. On a GAAP basis, this quarter's earnings were $0.43 per share compared to $0.87 per share last year. As Tony also mentioned, we have narrowed our non-GAAP earnings guidance to $3.30 to $3.50 per share, which reflects our confidence in the full year. As you refine your models for the remainder of the year, our earnings guidance implies estimated earnings for the second half of 2011 of $1.94 to $2.14 per share. As this is the first year with Allegheny and to provide greater clarity, I'll add that we anticipate achieving about 60% of those earnings in the third quarter and 40% in the fourth. As I walk through our second quarter results, it may be helpful for you to refer to the consolidated report to the financial community we issued this morning. As detailed on Page 18 of the consolidated report, there were several special items that decreased this quarter's GAAP earnings by a total of $0.22 per share. By comparison in the second quarter of 2010, special items increased GAAP earnings by $0.05 per share. There were 3 merger-related items that decreased GAAP earnings by a total of $0.12 per share. These included merger accounting, integration costs and regulatory charges. The resolution of litigation related, primarily to remediation cost for legacy manufactured gas plants in New York, reduced GAAP earnings by $0.05 per share.…

[Operator Instructions] Our first question is from the line of Dan Eggers with Credit Suisse. Dan Eggers - Crédit Suisse AG: Tony, I was just wondering if you'll give a little more thought on kind of the dynamics in Ohio, provisionally in AEP settlement, maybe this week and Duke's plant out there they're going a different direction. What are the routes you guys see available to try and keep Ohio on the path to a competitive market environment rather than going back to regulation for those guys?

Well, I think if there's a -- if you think about the AEP case, and probably synergy is going to be about the same, or Duke's about the same, there's multiple parties, not just FirstEnergy, engaged in trying to assure the competitive markets are the way to stay in Ohio and move both Duke and AEP more towards that model. We're not the only voice in this debate, although obviously, we're one of the larger ones. But obviously, there are customers involved. There are other marketers involved. And quite frankly, I think it's a hard sell overall to the basic process in Ohio is one in which whatever path you choose, it must be lower or less value than using a competitive market. And if in fact, they want to sell at lower-than-competitive prices, so be it. I don't think that's where their heads are at. I don't think that's where they're going. And from what I understand, their filings wouldn't support that. So I think the debate's still very lively and very much at the beginning here in the state. Dan Eggers - Crédit Suisse AG: Given the volume of customers that have shopped in Ohio, are you finding Duke and AEP's service territory folks are willing to kind of permanently step out of their service to avoid non-by passable charges, and I assume you guys talked earlier before. Do you do see any success capturing kind of that permanent customers shift right now?

Well I think we are, Dan. I think we're having some pretty strong success despite rules within each of those areas that are not conducive to shopping. So we are moving customers. I think if in fact, they knew that they could avoid the non-by passable charges by shifting before they're established, I think you'd see much more shopping, much more activity in those areas. Dan Eggers - Crédit Suisse AG: Okay. And I guess just one more question on kind of the shopping trends you're seeing. In Ohio, looks like you've kind of lost momentum on a lot of shifting on the side of your utility base. Do you think Pennsylvania can get to that same level of shop, 70%, 80%, 85% shopping overtime, and kind of what timeframe do you think that would occur under?

Well, go ahead, Mark, and then I'll answer some of -- I know you want to say something.

Dan, this is Mark. We've always talked about we only have so many megawatt hours to sell. And to the extent, we reduced some of our sales in Ohio and moved it someplace else. All it does, it means is that we're moving that megawatt hour, kilowatt hour to where we can generate a greater margin. In Ohio, shopping at around 75%, and I would expect it to stay pretty close to that. Pennsylvania, I believe, is up to 50%. And it's going -- our expectation is it would grow because it really somewhat opened up in net add NLEC [ph] at the end of December. So it's not so much we're dropping here or adding there. It's where we can get the most margin for that megawatt hour. Tony, you want to say something?

Yes. And I think what you'll see over time in Pennsylvania is shopping will approach the level that you're seeing in Ohio. I just think it will take a little longer because you don't have the ability in Pennsylvania to use tools like government aggregation, which allow you to make groups of residential customers look more like larger commercial and industrial customers, which means it takes a little longer to move customer by customer into those markets. But the fact of the matter is as customers get information, as it becomes clearer and clearer to them that there is an advantage to competitive markets, and they want to take advantage of it. There will certainly be suppliers out there like FirstEnergy. And FirstEnergy Solutions will hopefully be the preferred supplier of all these customers, and they'll seek contracts with us over a longer term. Dan Eggers - Crédit Suisse AG: And I didn't see an updated hedging slide, but are you guys on course to get this shift in customer mix that you expected from the analyst day?

Yes, very much so, Dan.

Our next question is from the line of Jonathan Arnold with Deutsche Bank.

A couple of questions. I think I heard you right that you're not planning to sort of give us some kind of holistic view of what the environmental rules mean for the -- your fleet until you get a final MACT rule. But based on what you've seen with the CSAPR rule and the reactions you've seen in the forward curves around the region, do you feel the market's generally reflecting that effectively or something different?

I think the market is beginning to appreciate the impact these rules may have on available generation. And I think it's just starting because there's just pieces of information coming out. I think the PJM auction kind of set a tone for that. The new CSAPR rule, which have accelerated requirements with respect to SO2 and NOx, and have limited trading capability within those -- within that potential compliance regime, I think it's -- I think we're at the beginning of trying to understand how this, in fact, impact prices going forward. And I don't think there's any question that it will.

Okay. And then just following up on that, I think, you've mentioned you have 4 of the supercritical units that are not controlled for NOx. If you were to decide you needed to do that for next year, how quickly could it be done?

Well, it can't be done in a year, I can tell you that. Now that's part of what we're looking at right now. I don't think it have to be done by next year, because they do have some controls on them. And we might be able to use of interim controls like SNCRs and better burners at some of the Allegheny plants. So I'm not quite ready to give you or to outline exactly all of the options we have near term and long term.

Okay. Can I ask a specific one on, firstly, to what extent do you have customers under contract in Duke's territory that whether contracts run beyond the current ESP. And if there are such customers, what's your sense of how they would get treated if the ESP was to go forward? Is there a risk they'd effectively be paying you for capacity and also having to pay Duke's capacity charge and how would the contracts deal with that?

This is Bill Byrd. We do have some contracts, which go beyond the current provider of Duke's ESP, not huge numbers of customers, but we do have some that’s specific to how the capacity would work from the customer perspective. We just have to work it out. It isn't provided for in our contracts, and we have to see how it would be dealt with in the regulatory side, and then works out with our customers.

Your contract is silent on that topic, basically.

Yes. Basically, Jonathan, anything you do inside of a market that makes things non-by passable in a competitive market makes it very -- it raises all kinds of issues and questions with respect to timing and with respect to who and how long they're willing to pay for things.

Okay. And if you allow me just on one another topic, we've seen some stories about some operational issues at Signal Peak, and it sounds like you might be pushed backs of the timing expectations on the sale a little bit, but maybe I didn't hear that right. What are your thoughts around timing of potential sale there?

Jonathan, this is Mark. We haven't changed our timing. I think we slowed it up until we moved the longwall into the second panel. That was done early July. There were some operational issues there, which required some additional supports. Mine Health Safety Administration has signed off on our plant on the process of doing that. They've signed off our ability to resume production. But we're still on schedule. We've narrowed it down 8 meters, as we said before. We didn't really want to get anyone into the mine until those panels were removed. So management's sole focus was getting that done. We're back into the sales process again. And in my mind, we're right on where we expect -- anticipated being in terms of schedule.

That's a 2012 event rather than '11 from a cash standpoint from the sound of it?

It could be 2011, but it would be probably later in the year. There are number of different options to pursue with respect to the sale. And the asset has a lot of value, and we'll take our time working through which option seems to be the best for us and our partner.

Our next question is from the line of Steve Fleishman, Bank of America.

A couple of questions. First, I'll ask a few that I'm not sure any of which you'll answer. But on the -- when you gave the merger outlook, you really gave 3 year's worth of guidance, and I know you don't want to be in a position to always be updating that. But so far, in the merger and all the different factors you baked in as well as the updates in the markets, would you say you're still on track for the 3 years?

I'll speak to the merger piece that we're certainly on track for the merger piece. We feel very comfortable with that. We talked about the fact there were 289 initiatives. They've all been assigned. Our folks are working them. So I feel very comfortable with that. Tony alluded to the prices seem to be moving up a little bit, so you can factor that in. We've talked about the fact that we're hedged about 75% in 2012, about 40% in '13. So I think we're very comfortable with where we are.

Okay. Secondly on RPM, I'm wondering if you'd give any color on what ended up happening with your subcritical plants bidding into the auction?

It's Bill Byrd, Steve. I think it be safe for you all to assume that we didn't sell forward the plants most at risk to the environmental rules.

So would that be like all your subcritical or some portion of them?

We've said there's 1,500, 2,500 megawatts of subcritical units that are most at risk from the environmental perspective, so in that range.

Okay. And then lastly, just I don't know if Donny's there, but just maybe some color on -- you've clearly done very well adding customers, retail customers during this time, what are you seeing on the competitive dynamic on retail? Is it getting a lot more? I mean, you're one of the big competitors making it more competitive, but are you seeing a lot of others? And what are you seeing on margins and the like?

Well I think in Ohio, I think, we would say that customers, as we've outlined before, still remain somewhat sticky. That market's been there a little bit longer. PA is just kind of starting up since the beginning of the year, so time will tell about that. But we're comfortable with the margins that we've said. We've only got so many megawatt hours to sell, and we're going to move them around to where we can get the most. And you got to remember, that our generation was built for a particular load shape, and all we're trying to do is replicate that shape at the highest possible margins. So we're very comfortable with where we are, and we're extraordinarily pleased with the efforts of Donny's group and how fast they've been able to do it. And not only on the front-end margin, but we're doing a lot of work, Steve on the back end and trying to make sure that we have the most efficient back room possible. So we don't get it on one end, and then give it away at the other. So we've been spending a lot of time on that and making a lot of progress there as well. So we're very pleased with the overall success, both in the capture of the customer and the margin and the efficiency that are being created in the back office.

Our next question is from the line of Marc de Croisset with FBR Capital. Marc de Croisset - FBR Capital Markets & Co.: I know you're still digesting this cross state air pollution rule. And when I looked at it, I found it to be really tough on Ohio and Pennsylvania. And the thought occurred to me, you had about $2 billion of CapEx in the outer years that I think was earmarked for environmental compliance, and I'm wondering if your initial assessment of this rule changes the timing of that CapEx.

Marc, this is Mark. We gave our guidance back in May. We said that our capital would be around $2 billion a year. It might change a little bit as we move. For example, this year we reduced some substation expense and moved it into other areas, but still staying within the $2 billion. That $2 billion was not used to address the environmental issues. So as Tony alluded to, we're doing our homework now, and we don't have a number, and we won't until we get to see all the different options, which we hope to have get through this summer. But I just want to be clear that, that $2 billion was what I would call the ongoing business itself. I should say, we did add $100 million in '12 and '13 for any potential engineering that needed to be done for the nuclear or the fossil units. Marc de Croisset - FBR Capital Markets & Co.: Okay. I think there was a $2 billion number outside of that 3-year projection period that was just a number, a very rough number for potential compliance with all EPA regulations you saw coming down this pike.

Yes. That's correct, Marc. In that number, there would have been, for example, there would have been investment at Eastlake 5. Beyond bank houses, which are probably the primary means for complying with the MACT rule. Marc de Croisset - FBR Capital Markets & Co.: And you don't see maybe a tick up in operating expenses for -- perhaps, you may be short, allowances in Ohio, Pennsylvania. I'm just speculating. But you don't see any of that impact yet from the cross state air pollution rule?

Well, again, not all this is all clear yet in terms of how the allowances and how this is going to get allocated. For example, the base year is 2005. Most of our equipment in Ohio was not scrubbed in 2005. It is scrubbed today, so the Sammis Plant construction project as an example. So how those allowances are going to get used across the state, they don't have to cross state lines to be able to use them in other plants in time how we will in fact meet the requirements for 2012, '13 and '14. Marc de Croisset - FBR Capital Markets & Co.: And if I may, just very quickly, you called industrial activity a bit spotty. What's happening with respect to industrial activity in your markets?

Well, I think that you have to remember that the first half of last year was extraordinarily strong with double-digit growth. We obviously wouldn't expect double-digit growth as nice as that might be. But we're seeing, where you got pockets of the market that are very, very strong. For example, steel and the piping for wells. You've got the Chevy crews on a third shift over at Youngstown. You've got the 2 auto engine plants for Ford. You've got some strong segments, and you've got some other segments that aren't doing so well, but it's all being compared against that very strong first half of last year.

Our next question is from the line of Paul Patterson of Glenrock Associates.

I wanted to ask you about the ESP staff proposal that they're I guess passing around to parties and what have you. Could you just give us a feeling as to where your general direction is at least, what they're actually proposing?

No. To be honest with you, I haven't seen it, Paul. So I don't even know if anything is being passed around. I know that's what people are talking about, but I haven't seen anything like that.

And on the guidance, the bottom of the range going up, what was that? Was that -- I'm sorry if I missed it. Was that because of weather or the merger outlook or a combination of things?

It is a combination of things. I mean July was -- I read this morning in the paper was the hottest July we've add in 140 years. I think we're getting better. The merger started February 28. We've got everybody in place now. Folks know what's expected of them. We got a better handle on where the costs are, where the opportunities are. If you recall, we took some of the Allegheny plants offline intentionally to get some of their production up, so I would say it's pretty much across the board. And that's why we're very comfortable with raising the bottom end.

Okay. And then with respect to the dispatch of the Allegheny plants, is everything looking there like you guys had expected that you'll be able to increase the supercritical, is that still on track?

Yes.

Okay. And then just finally, on the direct sales, it looks like there was a little bit of a decrease in the margin. Is that because of the type of customer you're signing or is that because of -- is that -- what's going on there, I guess? Is there any significant changes? It was only a couple of cents, but I was just wondering if there was -- it seem that the rates had -- I guess, the margin decreased a little bit or something there.

I think you're reading the numbers too finely. It's just noise.

I would say the impact associated with some of the forced outages that we had as compared to last year, which I think had a fairly major effect on what they can do, what they could sell, having to buy some purchased power. I think it's again another reason why we're fairly comfortable with the second half of the year. Sammis is back online.

Our next question is from the Hugh Wynne of Sanford Bernstein. Hugh Wynne - Sanford C. Bernstein & Co., Inc.: I just had a question regarding the fossil – output of the fossil fuel fleet at the FirstEnergy fleet you had the decrease in fossil fuel generation of about 2.1 million-megawatt hours, which is very substantial, about 18%, particularly per fleet as well as yours. So my question was how did that flow through earnings-wise to items like Purchase Power, wholesale sales, Transmission expense, and what portion of that earnings impact should we think of as kind of exceptional? Were there exceptional items that drove this decline in generation?

Well, that's a great question. I think it hit across the board. You had Sammis, 6 off for 91 days. You had Mansfield, 3 off for 32 days. You had Eastlake, 5 off for 7 days. It's 161 days. You compare that to, without getting in detail, some of the fossil units plant enforced last year of 107. So we lost a significant amount of the fleet in the first half, but the biggest chunk of that was Sammis, which will come back. Because you don't have Sammis, you go up your cost curve in terms of generation. So our fuel cost would go up. It's associated with that. The opportunity cost, we can't capture because those units are now being used and need our contractual sales. So it's across the board that Purchase Power goes up, fuel cost go up and the margin goes down. But as we've said, the biggest chunk of that was the Sammis, 6 unit of 91 days, and that is back online and expect to be back online for the balance of the year. Hugh Wynne - Sanford C. Bernstein & Co., Inc.: No EPS impact that you could offer?

It did have an impact, but it would kind of -- I have to speculate as to what the opportunity sales could have been. I'd speculate as to would that plant run or not run, so I would -- I think I'll just leave it that it had an impact. It would have been nice to have the units on particularly with the weather. We didn't get it and even despite the fact that those units aren't on, we're increasing the lower end of our guidance, given the confidence we have in the second half of the year. So despite all of that, we're still confident in what we told you back in May.

Our next question is from Paul Ridzon with KeyBanc Capital Markets.

I missed your commentary around you have some CARE allowances. Are you basically saying those are stranded at this point?

Paul, this is Harvey Wagner. We still will be using those throughout the remainder of the year. We're expecting that any kind of impairment that could result from that really wouldn't be anywhere near the numbers that you're seeing from others in the industry.

Okay. And just switching gears, one of the things about the Allegheny merger that you target was the ability to blend fuel. Can you just kind of give an update on where you are there, and what you have to do forward?

We're proceeding with plan. It just takes time to get the contracts in place with the transportation arrangements and the coal yard facilities set up, but we're proceeding with plan.

The only other thing I would is that it takes a while for people to understand how we manage our units, how we'd like those units to be managed, and that's all a part of the learning curve, and that unfortunately takes some time, and we're being careful as we go through it.

I think these question has been asked a couple of times, but you took up the bottom end of guidance. Can we assume that what's good for '11 is good for '12, '13 and forward?

We took out the bottom end of guidance in '11 and didn't speak to '12 or '13.

But It wasn't onetime, the '11 things, that really drove that?

I can just speak to the fact we increased the bottom end of the guidance for '11 because that was the focus of what we reviewed, and we're going through '12 and '13 right now. Okay, I'd like to thank everyone joining us on the call today. And as always, we appreciate your continued support and interest in FirstEnergy. Thank you very much.

Thanks, everyone.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. You may now disconnect.